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Covid-19 preventive measures made positive economic impact as KSE-100 climbs
Summary

Government started taking medical and economic measures since Covid-19 outbreak in Pakistan in March2020. Covid-19 seems to be blessing in disguise for the economy of Pakistan as it opened doors of opportunities and unthinkable steps to follow. The deferment of IMF’s program for at least a year to save around $12 billion payment and the flow of $1.4 billion from IMF for coronavirus and other multilateral institutions to follow while the revision of growth projection to negative 1.5 percent hence revision of IMF targets expectations of tax collection and others.

State Bank of Pakistan (SBP) had to revisit policy rate within a month to bring down policy rate from 11% to single digit 9%. It is again considering to bring it further down the policy rate to give relief to businessmen in their tough business situation besides giving them finances for payment of wages and salaries.

Government has introduced a number of economic packages. It has announced a Rs.1.2 trillion package mostly cash payment to poorer of the society. Rs.70 billion package for laid off worker and Rs.51 billion package for SME.

The importance of all these economic or survival packages are that for the first time the growth will follow different pattern from down to up thus should benefitting the poorer and middle class section of the society.

The investor in stock realizes the importance of these timely action in correct direction and PM statement “Covid-19 cases far less compared to other states” reassures them.

Short 4 days trading week due to May 1 holiday, saw the index gain1,305 points to cross 34,000 level to close at 34,111.64. The average KSE-100 Index volume decreased to 178 million. The market capitalization increased by Rs.209 billion to Rs.6,377 trillion.

Stocks dip 492 points on Monday as some lower earning given by some companies. Amreli Steels post Rs.688 million loss. PSO earnings tumble 49 percent. KSE-100 Index lost 491.81 points and closed at 32,314.57.

On Tuesday there was the unexpected buying by foreigner of $0.21m. The news of cement price not revised downward picked up by cement sector. The Maple Leaf and Pioneer were gainers. Stocks added 602 points to close at 32,553.39.

On Wednesday the expectation of declining inflation and indication of further interest rate cut pushed the Index up by 605 points to close at 33.158.84.

Finally the market on Thursday remained buoyant because of number of positive developments like single digit head line inflation for April, further 200 bps cut in policy rate, positive trend oil price in international market, sharp recovery in world stock market led the index gained 952.80 to close at 34,111.64.

 

Participants/Activity

On average shares of 340 companies were traded. Of these 195 were gainers and 124 were losers and 21 remained unchanged.

Foreigners were net seller $11.80m during the week; companies were buyer by $3.56m, Banks were seller $1.33m; Mutual Fund net buyer $4.24m and Individuals net buyer $2.25m.

Volume leaders during the week were: Maple Leaf Cement Co. Ltd 97m; Hascol Petrol 59m; Unity Foods Ltd 40m; Pak Elektron 27m; Pak Petroleum 18m, Pioneer Cement 12m; Bank of Punjab 8m and Engro Fertilizer 6m.

Triggers

– SBP reserves rise to $12.1 billion. An inflow of $1.39 billion from the IMF took the SBP reserves to $12.07 billion during the week ended on April 24.

– Revenue collection plunge 16 percent in April: The month of April saw a fall in revenue collection from last year by 16.4 percent to Rs.242.46 billion with all the four major heads showing declines.

– Inflow of hot money begins slowly: While the outflow of foreign investment in treasury bills still remain high, April also witnessed some uptick in hot money inflows.

– Sharp reduction in cargo handling as land, air and sea routes closed.

– Global shares jumps, oil surge. World stock markets surged on Wednesday following encouraging news for an experimental Covid-19 treatment and some positive earnings reports, while beaten up oil prices surged.

Conclusion

Positive Prime Minister Imran Khan on Thursday announced that the government would further ease lockdown by reopening more businesses and industries as the intensity of the coronavirus in Pakistan was much lower than that in Europe and the US.

A notice to the PSX by D. G. Khan Cement has resumed production processes at its plant at D. G. Khan.

Slowly and gradually once business activities start and reforms of government are truly implement we shall see revival of economic boom.

Raees Uddin Khan,
Research & Development Institute of Securities Management Research& Training (Pvt) Ltd, Karachi
Dated: May 1, 2020

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